Credit: Brandon Smith
If you’re a 20-something and are thinking about dipping your toes into the world of investing, then you have come to the right place. Investing in your 20’s is the best time for someone to invest for a number of reasons. Investing in stock markets, whether domestic or foreign, is an excellent way to not only garner extra revenue streams, but to develop a comfortable retirement as well.
Here are a few reasons why you should begin investing as soon as possible if you’re a 20-something.
You Have Time on Your Side
People who are in their 20’s have time on their side, which is everything in stocks. The way that compound interest works is that the longer money is in an investment portfolio, the more exponentially it can grow. This is key. By starting an investment fun at the age of 25 versus the age of 30, you can save up to hundreds of thousands of dollars more for your golden years.
Having time on your side not only benefits compound interest, either. It will allow you to become more aggressive in your investment portfolios. When you’re in your 20’s, you are able to invest aggressively because if a stock tanks, you have plenty of time to rebound compared to later years such as your 40s and 50s.
You Also Have More Available Income
20-somethings also have a lot more available income than people who are older. Now, this may not seem true because people who have decades into their career earn more per year, but those people also have big mortgages, college funds for their kids, and much more to take care of. At the end of the day, expendable income isn’t too common.
However as a 20-something, you’re able to nestle more money into your savings account because you have less expenses. In addition to this, 20-somethings are able to be much more productive in the early years of their careers.
You Can Buy Some Damn Cheap Stocks
You don’t need to invest thousands of dollars if you’re just getting into the world of stocks. Some stocks can be bought at dirt cheap prices and still manage a solid price-to-earnings ratio. When you look at stops in the US market, such as the S&P 500, the prices can be quite high. This is intimidating for people who want to explore investing, but are nervous to throw their money away.
But you don’t need to stick to the S&P 500 stocks, even though they tend to be quite reliable. Instead you can look to foreign markets and take advantage of dirt cheap stocks in exploding markets. These markets are vibrant in places such as India and China which are quickly becoming economic machines and the hottest places to invest. Just remember to diversify your funds across markets since they can be unstable in their developing stages.
Build Great Saving and Budget Habits
Perhaps the best reason of all to begin invest in your 20’s isn’t for the monetary gain, but the skillset that it can provide for you. When you begin investing during your early years in the adult world you’re learning valuable pieces of knowledge about finances and forming great financial habits.
People who begin investing later in life, say their 40s and 50s, already have financial habits which have set in place and are difficult to change. These habits can be bad habits which damage your financial success. By forming positive financial habits at a young age you’re more likely to have a comfortable financial future.
Investing in stock markets, both domestic and foreign, can have incredible benefits for those who are in their 20’s. Not only are there many benefits, but the risk is quite low as well. It’s important to make sure you research your investments well and to keep in mind any government paperwork you’ll have to file to claim your portfolio. The last thing anyone wants is to get stuck with T1135 penalties or an angry IRS! Once you cover these basic bases, however, investing is a fun and exciting journey.